The expanding ecosystem of DTC health brands and the shift toward increasingly complex care
Despite the current energy and institutional investment in direct-to-consumer (DTC) healthcare, just a few years ago industry experts warned that the DTC bubble would soon burst. At the time, commonly cited factors included:
However, since the onset of the COVID-19 pandemic, the world of virtual healthcare has experienced explosive growth, with particular success among DTC companies. These digital healthcare companies offer innovative solutions to age-old problems that have plagued healthcare in the US market.
The birth of direct-to-consumer healthcare was dominated by the model of selling generic drugs for specific health concerns to consumers. Companies like Ro and Thirty Madison, having raised $876 Million and $70 Million respectively, pioneered this model with a variety of pharmaceutical brands. Take Keeps, a pharmaceutical brand under Thirty Madison that focuses exclusively on men’s hair loss. Keeps allows men over 18 who are struggling with hair loss to consult a licensed physician, choose from a set of treatment plans, and receive prescription finasteride or minoxidil at their doorstep. While this “consultation-to-prescription” model is effective for treating specific concerns like hair loss, it has its limitations. Namely, a DTC healthcare landscape that consists primarily of these types of companies becomes highly siloed and requires consumers to engage with a different company for each health issue that crops up. And for companies, the consultation-to-prescription model can hinder long-term patient engagement, since many patients will only require medication for a period of time.
As the DTC health category has grown, companies have increasingly turned to more complex virtual care platforms that use a wider variety of tactics to meet more patient needs and keep those patients engaged for longer. Companies that began with the consultation-to-prescription model for specific health concerns are expanding to offer a wider range of services and products, while many new companies are leading with a complex care model. Although DTC health companies still face challenges, the future offers opportunities for more integrated and holistic care that serves patients better and for longer than disparate, highly siloed care.
This article will look at the benefits, challenges, and opportunities within direct-to-consumer health, while also categorizing the existing market based on care goals, tactics, and target populations.
The DTC model offers a variety of advantages to both providers and patients over traditional care pathways. With care available at one’s fingertips, patients can address many of their healthcare needs without having to leave home and often at a lower cost. Meanwhile, providers can utilize various digital tactics to treat patients more efficiently. This section will explore the additional benefits that come with virtual care.
Better Economics: Offering products and services directly to consumers can improve companies’ bottom line and lower prices for consumers. DTC companies can improve profit margins by circumventing traditional intermediaries and reducing distribution costs and inefficiencies. Subscription payment models, which are popular in DTC health platforms, also offer companies a consistent and reliable revenue stream. As a result, consumers benefit by receiving many types of care at a lower cost. For example, since online DTC players entered the hair loss space, the price of Finasteride for consumers has dropped from $70 per month to about $30 per month.
Efficiency: The digital-first nature of most DTC brands increases efficiency, meaning doctors can serve more patients in the same amount of time. This is significant given the overwhelmed and stressed state of the United States’ healthcare system, which is short on healthcare facilities and both primary care and non-primary care specialty physicians.
Convenience: The same convenience that consumers have come to expect from shopping, travel, and financial management now extends to health. Patients can access healthcare services from the comfort of their own homes and have medications shipped to their doorstep, avoiding the hassle and frustrations of waiting rooms and the in-person pharmacy. The DTC approach may be particularly beneficial for people lacking consistent access to care because of financial, social, cultural, or geographical barriers, many of which have been exacerbated by Covid-19.
User Engagement: The DTC model can empower consumers with easily accessible information and services, allowing them to take a more proactive role in managing their health. Many companies are seizing the opportunity to not only provide products and services, but also offer specialized knowledge about poorly understood health topics.
Personalization: Many DTC health platforms collect information about users in order to personalize their experience through tailored content, symptom tracking and visualization, or condition-related recommendations. The growing use of data tracking through wearable devices and apps also empowers patients to more directly monitor behaviors and health outcomes over time. With online access to a plethora of health information, consumers are better equipped to understand their health, while digital health services with access to this data are able to better personalize their experience. Today’s DTC health companies have access to a number of tools that they can use to communicate with—and offer care to—patients.
With many clear benefits to applying the direct-to-consumer model to virtual healthcare, there are also a number of market factors that have propelled DTC adoption and success. The COVID-19 pandemic has created unprecedented need for virtual care while other developments like regulatory changes and expiring patents are making it easier for entrants to get a foot in the door.
When examining the growth of virtual care, the numbers speak for themselves. In Q4 2020, global Venture Capital funding for digital health came to $4.5 Billion as year-over-year funding increased by 165% compared to $1.7 Billion during the same period a year prior. DTC brands like Ro are leading the game with staggering investments. Most recently, Ro raised $500 Million in new funding, resulting in a massive private capitalization of $876 Million.
COVID-19: As the global pandemic has necessitated more digital and low-touch care delivery, DTC companies have stepped up to the plate to meet the demand for virtual care. With most of the US population having experienced stay-at-home quarantine orders, Covid has also exacerbated consumer concerns over physical and mental health, especially for younger age groups and those managing a chronic disease. The physical effects of Covid diagnoses and the toll of Covid-induced isolation on mental health has only fueled interest in—and demand for—virtual DTC healthcare options.
New legal openings for technology: The Affordable Care Act expanded the use of telehealth at the federal level for patients on Medicare, but left telehealth reimbursement policies up to individual states for patients covered by private insurance or Medicaid. There has since been an ongoing state-by-state debate about “health parity” or whether telehealth visits offer the same level of care and quality as in-person appointments and therefore whether they should be reimbursed as such.
This debate took a sudden turn in 2020 when the COVID-19 pandemic necessitated a sudden shift to virtual care and telehealth visits across the country. Health plans and state governments alike made emergency concessions regarding reimbursement for telehealth to allow providers to continue to serve patients during the pandemic’s peak. It is unclear whether these policies will be upheld as states recover from the pandemic, but the widespread adoption of telehealth over the past year will likely nudge policymakers in that direction.
Increasing costs of care: The cost of healthcare is rising faster than the median annual income in the United States. As of 2019, the US spent nearly $11,000 per capita on healthcare, more than any other high-income country. With the high cost of deductibles, copays, and insurance, patients face a substantial burden in paying for care. This has led many consumers to take a more active role in understanding and evaluating how they utilize the healthcare system, opening the door for direct-to-consumer companies who speak directly to patients about their services and costs.
Widespread patient frustration: In addition to the rising cost of care, the healthcare industry has not previously felt pressure to pay a premium to create a strong patient experience. This is in part because insurance companies have not historically reimbursed care differently based on patient satisfaction. Care is also so siloed that each provider owns only a very small piece of the broader patient journey. For patients, however, this has led to widespread frustration and dissatisfaction when navigating traditional care pathways.
The average patient does not understand how service costs are calculated and in many cases does not know what their insurance company will cover until after a visit or procedure is complete. There is also no central guidebook or resource to help patients understand who to see for what medical issue or condition, leading many people to bounce from PCP to specialist and back without clear answers. One 2019 survey found that nearly half of American respondents, 43%, were “not very” or “not at all” satisfied with the US healthcare system.
This is where DTC health companies are able to set themselves apart. Like many consumer technology companies, direct-to-consumer health players are able to build a loyal audience because of their focus on excellent user experience and customer support. Most of these groups invest heavily in education resources to ensure that all customers have access to clear and accurate information about the company’s area of medicine. DTC companies are also purposefully transparent about pricing—whether a subscription, cost per visit, etc.—in contrast with the often confusing and opaque cost structure of traditional pathways.
Expiring patents. Expiring drug patents have also catalyzed the rise of DTC virtual health. Many medications that were once protected by patents are now fair game for any company to rebrand and build services around. As DTC review site Fin vs Fin identifies, men’s health companies Roman and Hims have capitalized on the opportunity to rebrand by launching their own hair loss subscription services after the expiration of Merck’s patent on Finasteride in 2014 .
Broader shifts toward DTC: A final force at play in the rise of DTC health is the broader success of direct-to-consumer products and services across industries. DTC marketing has proven successful particularly within the e-commerce space because of its ability to offer convenience, simplicity, and often affordability to consumers. Many direct-to-consumer brands have completely upended traditional retailers through their use of digital channels, excellent user experience, and a community of loyal shoppers. This shift has normalized direct-to-consumer models across industries and paved the way for the same expectations of convenience, clarity, and enjoyment among healthcare consumers.
The current landscape of direct-to-consumer healthcare companies is vast, diverse, and growing. In order to understand the various niches and markets that make up the DTC healthcare landscape, it is useful to categorize companies based on:
There are four main categories of care into which most digital health companies fall: primary care, chronic condition management, elective subspecialties, and acute care.
Today’s DTC health companies have access to a number of tools that they can use to communicate and offer care to patients. These tactics include:
Each company uses a variety of these tactics to deliver care and as the field becomes more crowded, more and more companies are expanding care delivery to include a combination of diverse techniques.
The airtable below features many direct-to-consumer health companies categorized by care type and the tactics they use to serve patients. While some of these companies also reach patients through other channels (health plans, employers, etc.) they all have a prominent DTC business line. If you know of any companies we missed, send them to firstname.lastname@example.org.
As shown in the table above, the direct-to-consumer field also varies by target patient population. Some companies target certain segments of the population based on specific demographics (gender, age, sexuality, etc.), while others simply target those with certain health conditions (diabetics, smokers, etc.).
Many of the companies that target specific demographics aim to address health disparities around quality, access, and utilization of care. For instance, companies focused on queer and trans health offer specialized care for members of the LGBTQ+ community, who have historically lacked access to sufficient healthcare that is safe and inclusive. Examples include Folx Health and Plume Health, which offer a range of services like gender-affirming hormone therapy, STI kits, mental health care, and more.
There are also companies that aim to better serve BIPOC patients, who are often let down by race-based inequalities that have long plagued the US healthcare system. Spora Health is a “culture-centered” provider offering primary care services for people of color, while Hurdle Health offers “culturally intentional” mental health services for patients from “diverse and ethnic social backgrounds.”
Targeting specific population segments helps companies better understand the end user and tailor care to their specific needs and experiences.
As the direct-to-consumer health field grows, niche product or service offerings are being challenged by companies that claim to “do it all.” Many provider organizations are building or acquiring virtual care services to offer a broader range of care tools. This leads to a rise in complex virtual healthcare—more comprehensive and holistic care offered by a company through the use of diverse digitally-enabled tactics and services.
Companies that once focused on prescribing generic medications for a few health concerns or tracking specific patient data are expanding to treat a variety of patient concerns in different ways. Take women’s health, for example. Just a few years ago, the industry’s biggest DTC women’s health companies were essentially online platforms for tracking periods or prescribing birth control. Now, companies like Tia don’t just allow users to track and understand their period, but serve as a provider for primary care, gynecology, mental healthcare, and acupuncture. In addition to treating a wide variety of health concerns, Tia’s model utilizes several care tools, including telehealth visits, asynchronous messaging, an online patient portal, and in-person clinics. Their rapid growth and expansion is evidenced by the recent partnership with CommonSpirit, one of the country’s largest nonprofit hospital systems. Together, the groups plan to open additional Tia clinics in the Phoenix area and beyond.
Many consumers want their healthcare products prescribed by their providers and directly integrated into their existing healthcare services. The complex virtual care model that companies like Tia are following allows patients to rely on one virtual platform to meet most of their healthcare needs, rather than having a different company prescribe treatments for every health issue. This means that the DTC healthcare market is becoming less siloed and fragmented than it originally seemed, thanks to the use of more care tools and improved business models that let companies integrate a broader spectrum of categories of care.
Even companies that focus on one specific health concern (rather than primary care) are becoming more comprehensive as they combine care tactics to better treat patients. Heartbeat Health is a startup working to improve the way cardiovascular health is delivered, with a “digital first” model that sets patients off on the right foot for receiving quality care. The Heartbeat app is a “full-service telemedicine platform” that gives patients access to on-call physician care through telehealth and asynchronous messaging, as well as robust data, insights, and analytics through the use of data tracking and remote and in-person diagnostics. By supplementing Heartbeat’s in-person care offerings with remote patient monitoring and telehealth communication, the app is making it easier for patients to stay on top of their health and access care whenever they need it, while allowing cardiologists to better monitor and treat patients.
Despite dramatic growth in DTC healthcare, there are still challenges that companies and the industry as a whole must confront and overcome.
Regulations: As DTC healthcare continues to grow, so does the need for more robust development of guidelines and regulations. The current regulation of digital healthcare offerings remains imperfect and with the rapid expansion of DTC products and services, federal regulators like the Federal Drug Administration (FDA) are still catching up to create appropriate standards. Given that DTC products are able to bypass typical filters and safeguards of the healthcare system, there is risk that low-value or even harmful products can enter the market, even from companies with good intentions. Going forward, then, regulators, clinicians, and researchers must work together to minimize risk while maximizing benefit.
Vetting Criteria: With DTC healthcare services and products being marketed directly to consumers as the name suggests, they often operate outside of traditional clinical procedures and bureaucratic hoops. While this allows for more rapid innovation, it also puts the onus on patients to research and choose the right solution for their needs. For DTC companies with no FDA regulation, big tech companies are really the only gatekeepers to consumers, determining which applications make it onto their respective app stores. With such a vast landscape of companies, reviewing options can be time-consuming and difficult for consumers, not to mention there is no real framework for analyzing the quality of care being provided and how different companies compare. Better guidelines from regulators and a reliable rating system or set of criteria would better equip patients to take control of their health and make decisions with confidence.
Health vs. Wellness: The innovation of healthcare offerings and cultural shifts toward promoting healthy lifestyles has blurred distinctions between healthcare and wellness. While this trend isn’t unique to the direct-to-consumer segment of healthcare, its effects are particularly noticeable. This is especially true for DTC products that make explicit claims about wellness or lifestyle but also imply health benefits for medical conditions. The challenge of understanding and clarifying the health vs. wellness distinction ties back to concerns over regulations and the need for vetting criteria, which could help assess and categorize companies for consumers.
Digital direct-to-consumer health companies offer the convenience, efficiency, affordability, and customizable experience that many consumers want from their healthcare. As market factors like COVID-19 and regulatory changes support the growth of the DTC healthcare landscape, companies continue to innovate in order to serve patients better and for longer. Specifically, by utilizing a wider variety of care tactics, companies are providing care that is more complex and comprehensive. This is a pronounced shift from earlier DTC approaches focused on offering generic prescriptions or short-term care for a small range of health concerns. Looking forward, it will be interesting to watch how companies respond to challenges as they look to maintain growth and keep consumers engaged.